Health Care Reform Information
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Do Small Business Plans Still Make Sense?
Note: Health Care Reform is extremely complex and implementation is dynamic with new laws and rules being issued constantly.
This page represents a good faith effort to aid in understanding the changes.
This page represents a good faith effort to aid in understanding the changes.
Employers with more than 50 Full Time Equivalent (FTE) employees will be required to offer a plan to all full time employees, or be subject to potential penalties. The plan must meet certain affordability and benefit level tests as well. This site will focus on strategies for businesses with less than 50 FTE.
Employers with less than 50 FTE employees are not required to offer group health plans under Health Care Reform, just as they haven't been in the past.
Sole Proprietorships and single owner S Corps are no longer eligible for small group insurance plans. For example, if only an owner and a spouse are enrolled, they will be required to terminate their current small group plan as they no longer fit the definition of a 'small group'. These groups would apply for individual insurance, either through the Covered California Exchange or outside of the Exchange. As of January 1st, 2014, all individually issued plans are guaranteed issue.
In order to qualify as a 'small group', there must be at least 2 members involved in the business with one of the members being a non-spouse, non-owner, W-2 employee. Only the W-2 employee needs to actually enroll on the group plan.
Small groups currently offering a health insurance plan but considering terminating the plan should ask the following questions:
What are the options on the Small Business Health Options Program (SHOP)?
How would the employer help offset employee's benefits costs on a tax efficient basis? Consider:
How does the current plan compare to alternatives on the Exchange? Consider:
Small businesses offer robust employee benefits packages on a subsidized basis to:
Employers will continue to consider sponsoring employee benefits on a subsidized basis including:
Employer sponsored health insurance will likely continue to be a tax-efficient way to compensate and attract quality employees.
Employers with less than 50 FTE employees are not required to offer group health plans under Health Care Reform, just as they haven't been in the past.
Sole Proprietorships and single owner S Corps are no longer eligible for small group insurance plans. For example, if only an owner and a spouse are enrolled, they will be required to terminate their current small group plan as they no longer fit the definition of a 'small group'. These groups would apply for individual insurance, either through the Covered California Exchange or outside of the Exchange. As of January 1st, 2014, all individually issued plans are guaranteed issue.
In order to qualify as a 'small group', there must be at least 2 members involved in the business with one of the members being a non-spouse, non-owner, W-2 employee. Only the W-2 employee needs to actually enroll on the group plan.
Small groups currently offering a health insurance plan but considering terminating the plan should ask the following questions:
What are the options on the Small Business Health Options Program (SHOP)?
- Tax credits of up to 50% for groups of 24 or less FTE,
- Average wages must be $50,000 or less,
- Tax credits available only for first two years.
- Employer pays at least 50% of employee premium.
How would the employer help offset employee's benefits costs on a tax efficient basis? Consider:
- Payroll taxes for employer,
- Payroll taxes for employee,
- Employer contributions to health care premiums are tax deductible.
- Pretax treatment of employee premium share,
- Section 125 Premium Only Adjusted Gross payroll adjustments that reduce FICA and workers compensation rates.
How does the current plan compare to alternatives on the Exchange? Consider:
- Plan designs and options,
- Physician networks,
- Availability of subsidies for employees going on the exchange,
- Price.
Small businesses offer robust employee benefits packages on a subsidized basis to:
- Attract quality employees,
- Improve loyalty of employees,
- Reduce employee turnover.
Employers will continue to consider sponsoring employee benefits on a subsidized basis including:
- Health
- Dental
- Vision
- Chiropractic
- Life
- Supplemental Accident Medical Benefit
- Critical Illness
- Disability
Employer sponsored health insurance will likely continue to be a tax-efficient way to compensate and attract quality employees.